NISM Series X-A · Unit 9 of 12 · about 10% of the paper
Insurance planning: NISM Series X-A notes and practice questions
Insurance protects the plan. This unit covers life and health insurance, need analysis, types of policies and claims.
What to know in Unit 9
- Term versus savings policies.
- Human life value and need-based cover.
- Health and general insurance.
Key terms, examples and exam traps
Term insurance
Term insurance pays the sum assured on death during the term and nothing on survival, making it the cheapest pure protection.
Example. A family earner buys cover for twenty years at a low premium.
Exam trap. This statement is false: Term insurance returns premiums if the policyholder survives.
Endowment plan
An endowment plan combines life cover with savings and pays on maturity or earlier death, with lower cover and returns than term plus investment.
Example. A policy pays a lump sum after twenty years or on earlier death.
Exam trap. This statement is false: An endowment plan offers the highest cover per rupee.
Whole life insurance
Whole life insurance provides cover for the whole life of the insured, typically up to a very advanced age.
Example. A policy that pays at death whenever it occurs.
Exam trap. This statement is false: Whole life insurance ends at 60.
Human life value
Human life value estimates the present value of the future income of a person that his family would lose on his death.
Example. An adviser computes the value of future earnings to size the cover.
Exam trap. This statement is false: Human life value is the sum of premiums paid.
Needs analysis
Needs analysis sizes life cover by adding liabilities and future goals and subtracting existing assets.
Example. An adviser adds a home loan and child education costs and subtracts savings.
Exam trap. This statement is false: Cover is fixed at five times the premium.
Rider
A rider is an optional benefit added to a base policy for an extra premium, such as accidental death or critical illness.
Example. A policyholder adds a benefit that pays on diagnosis of a serious disease.
Exam trap. This statement is false: A rider reduces the base premium.
Health insurance
Health insurance covers hospitalisation and related costs up to the sum insured; features include waiting periods, co-payment and exclusions.
Example. A policy pays ₹5 lakh of hospital costs in a year.
Exam trap. This statement is false: Health insurance pays unlimited costs.
Family floater
A family floater covers the whole family under one sum insured shared among members.
Example. A couple and children share one ₹10 lakh cover.
Exam trap. This statement is false: A floater gives each member a separate sum insured.
Super top-up
A super top-up pays when claims in a year exceed a threshold, giving high cover at a low premium.
Example. A client adds ₹50 lakh cover above a ₹10 lakh deductible.
Exam trap. This statement is false: A super top-up replaces the base policy.
Waiting period
A waiting period is the time after purchase during which certain claims, such as pre-existing diseases, are not payable.
Example. A claim for a planned surgery is rejected in the first month.
Exam trap. This statement is false: Waiting periods do not exist in health policies.
Critical illness cover
Critical illness cover pays a lump sum on diagnosis of specified serious illnesses, regardless of actual expenses.
Example. A policy pays ₹20 lakh on diagnosis of cancer.
Exam trap. This statement is false: Critical illness cover reimburses bills only.
Personal accident cover
Personal accident insurance pays on death or disability caused by accident, and may pay for temporary disablement.
Example. A policy pays when the insured loses a limb in an accident.
Exam trap. This statement is false: Personal accident cover pays for any illness.
Motor insurance
Third-party motor insurance is mandatory in India and covers liability to others; comprehensive cover also covers damage to own vehicle.
Example. An owner buys a policy covering both liability and own damage.
Exam trap. This statement is false: Third-party cover pays for damage to your own car.
Home insurance
Home insurance covers loss or damage to the structure and contents from specified perils such as fire and flood.
Example. A homeowner insures the building against fire.
Exam trap. This statement is false: Home insurance covers only jewellery.
Insured versus assured
Under insurance, indemnity policies compensate actual loss up to the sum insured, while life policies pay a fixed sum assured.
Example. Health policy reimburses actual bills; life policy pays the fixed sum.
Exam trap. This statement is false: Life insurance reimburses actual loss.
Claim settlement ratio
The claim settlement ratio shows the share of claims paid by an insurer; a high ratio suggests a better claim record.
Example. An insurer paid 98 of every 100 claims.
Exam trap. This statement is false: Claim ratio is the premium refunded.
Nomination and assignment
A nominee receives the policy proceeds on the insured's death, while assignment transfers rights in the policy to another person, such as a lender.
Example. A policyholder names his wife to receive the claim.
Exam trap. This statement is false: A nominee becomes the permanent owner of the policy.
Underwriting
Underwriting is the insurer's process of assessing risk and deciding whether to accept a proposal and at what premium.
Example. An insurer asks for medical tests before issuing a large cover.
Exam trap. This statement is false: Underwriting is the payment of claims.
Free-look period
The free-look period lets a policyholder return a policy within a stated number of days and get a refund of premium, less minor deductions.
Example. A buyer cancels the policy within the free-look window.
Exam trap. This statement is false: The free-look period starts after the first claim.
Mis-selling in insurance
Selling insurance as an investment, or hiding charges and conditions, is mis-selling and a conduct violation.
Example. An agent promises that a policy will double money in five years.
Exam trap. This statement is false: Selling insurance as a guaranteed investment is acceptable.
6 practice questions
Read each question and choose your answer before opening the free mock, which shows the correct answer and the reason.
Q1. Which term is described here? Third-party motor insurance is mandatory in India and covers liability to others; comprehensive cover also covers damage to own vehicle.
- Senior Citizens' Savings Scheme
- Real estate
- Motor insurance
- Mutual fund structure
Q2. Which term is described here? Home insurance covers loss or damage to the structure and contents from specified perils such as fire and flood.
- Corporate bond market
- XIRR
- Home insurance
- Financial market
Q3. Which statement best describes “Mis-selling in insurance”?
- A cash flow statement lists a client's income and expenses to show the surplus available for saving.
- Selling insurance as an investment, or hiding charges and conditions, is mis-selling and a conduct violation.
- Exchanges provide the trading platform; depositories hold securities in electronic form; clearing corporations settle trades.
- Rebalancing restores the target allocation by selling what has grown overweight and buying what lags, controlling risk.
Q4. Which term is described here? Under insurance, indemnity policies compensate actual loss up to the sum insured, while life policies pay a fixed sum assured.
- Cash flow statement
- Home insurance
- Insured versus assured
- Goal prioritisation
Q5. Which statement best describes “Family floater”?
- Tax deducted at source is tax withheld by the payer on specified payments such as salary and interest, and credited to the payee's tax account.
- A cash flow statement lists a client's income and expenses to show the surplus available for saving.
- A family floater covers the whole family under one sum insured shared among members.
- Market risk is the risk of loss from overall movements in market prices that cannot be diversified away.
Q6. Which term is described here? A nominee receives the policy proceeds on the insured's death, while assignment transfers rights in the policy to another person, such as a lender.
- Code of conduct
- Will
- Nomination and assignment
- Inflation and interest rates
Frequently asked questions
How much of NISM Series X-A comes from Unit 9?
Unit 9 (Insurance planning) usually carries about 10% of the questions. The whole exam has 100 questions and the pass mark is 60%.
What should I study in NISM Series X-A Unit 9?
Term versus savings policies. Human life value and need-based cover. Health and general insurance.
Are these NISM Series X-A practice questions free?
Yes. Take the full free mocks to see the correct answer and the reason for every question.
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